Working Paper: NBER ID: w25705
Authors: Rafael Di Tella; Dani Rodrik
Abstract: We study preferences for government action in response to layoffs resulting from different types of labor-market shocks. We consider the following shocks: technological change, a demand shift, bad management, and three kinds of international outsourcing. Respondents are given a choice among no government action, compensatory transfers, and trade protection. In response to these shocks, support for government intervention generally rises sharply and is heavily biased towards trade protection. Demand for import protection increases significantly in all cases, except for the “bad management” shock. Trade shocks generate more demand for protectionism, and among trade shocks, outsourcing to a developing country elicits greater demand for protectionism than outsourcing to a developed country. The “bad management” shock is the only scenario that induces a desired increase in compensatory transfers. Effects appear to be heterogeneous across subgroups with different political preferences and education. Trump supporters are more protectionist than Clinton supporters, but preferences seem easy to manipulate: Clinton supporters primed with trade shocks are as protectionist as baseline Trump voters. Highlighting labor abuses in the exporting country increases the demand for trade protection by Clinton supporters but not Trump supporters.
Keywords: Labor Market Shocks; Trade Protection; Government Intervention; Policy Preferences
JEL Codes: F16
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| labor market shocks (J49) | preference for government to do nothing (H19) |
| labor market shocks (J49) | demand for trade protection (F13) |
| bad management shock (M54) | demand for transfers (F16) |
| political ideology (P16) | demand for trade protection (F13) |
| Trump supporters (K16) | demand for protectionism (F52) |
| Clinton supporters primed with trade shocks (F69) | protectionist preferences (F52) |
| highlighting labor abuses in exporting countries (J82) | demand for trade protection among liberals (F13) |
| highlighting labor abuses in exporting countries (J82) | demand for trade protection among conservatives (F52) |